On my 04 Tahoe, I had the message come up after driving through deep water and it would also get stuck in auto 4x (push button selector)..apparently the transfer case encoder motor gets water in the connector and doesn't work properly until it dries out. Just an idea if you have push button 4x. Mine cleared up in a few days of driving.

Thanks for the response guys. I've actually been too busy to do anything with it yet. I plan on checking grounds and connections. Could possibly be something getting wet. It came on last week when we got the first rain we have had in 6 months. What little searching I have done online I have found that several people have had problems with encoder in the transfer case and the push button switch itself. I figure I can replace both of these cheaper than having a "mechanic" look at it. Lol

Update......so I finally read the codes and have C0300 and C0327. I ordered a motor from rock auto (dorman part number 600-910). I put it on and it will go in auto, 2 hi and 4 low. When you push 4hi it flashes and you can hear the motor but then it goes to "auto". I assume bad motor. Sent motor back and got another. It does same thing! Any ideas??